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Efforts to thin out the supply side in crude markets, largely shouldered by Saudi Arabia, bore fruit in July. Major energy forecasters have recently reached a consensus that oil demand will outweigh supply in 2023. As a result, rising oil futures are pushing prices well-beyond Saudi Arabia’s fiscal breakeven point – the key mark that delineates the Kingdom’s ability to pay for its planned budget expenditures. Crude prices had fallen below that threshold in May and June, ramping up concerns that tumbling prices were getting out of control. Saudi Arabia is widely expected to extend ongoing unilateral cuts of 1 million barrels per day through September to continue supporting prices.

Related ETFs: iShares MSCI Saudi Arabia ETF (KSA), Invesco DB Oil Fund (DBO)

In mid-July, the US’s Energy Information Administration (EIA) flipped its view on the global supply-demand balance of oil markets. Previously, the EIA had forecast an oil surplus for the year, resisting the more bullish outlook from both the International Energy Agency (IEA) and Organization of Petroleum Exporting Countries (OPEC). However, due to ongoing production cuts around the world, the EIA acknowledged that global supply would likely be slimmer than previously expected, with annual output equivalent to 101.1 million barrels per day (bpd) – just short of demand. This new consensus in the energy markets has likely played a role in boosting crude oil futures throughout the month of July, with international benchmark Brent crude oil surpassing $84.00 per barrel this morning for the first time since April.

That threshold is significant for the countries that are taking on some of the most significant crude production cuts. In particular, Saudi Arabia has shouldered millions of barrels per day in cuts to their oil output to raise prices from the doldrums they slipped into during May and June. The implementation of this strategy, which has recently borne fruit, was likely made necessary by the Kingdom’s need to balance significant fiscal expenditures, which have…

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